Gateway 2018

2018 | THE B.C. PORT MAGAZINE

GATEWAY

SHIPPING HORIZON BRIGHTENS THE ASIAN EQUATION

CYBERCRIME WAVES FIRST NATIONS INITIATIVES

NAVIGATING SUPPLY CHAIN ISSUES: CHALLENGES, OPPORTUNITIES

OUTLOOK

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INFRASTRUCTURE

PROFILE

TECHNOLOGY

ENVIRONMENT

2018-04-03 11:35 AM

Innovative leaders.

Responsible stewards. )RU RYHU \HDUV *OREDO &RQWDLQHU 7HUPLQDOV KDV VXVWDLQDEO\ JURZQ WKH $VLD 3DFLČ´F Gateway with innovative technology and industry-leading practices. This year, we took our HÎ?RUWV WR WKH QH[W OHYHO ZLWK WKH Î&#x2013;QWHUPRGDO 5DLO <DUG ([SDQVLRQ 3URMHFW DW *&7 'HOWDSRUW SLFWXUHG DERYH $Q H[DPSOH RI LQGXVWULDO GHQVLČ´FDWLRQ WKH SURMHFW ZDV FRPSOHWHG ZLWKLQ WKH H[LVWLQJ IRRWSULQW \HW LQFUHDVHV WHUPLQDO FDSDFLW\ E\ RYHU DOORZLQJ XV WR PHHW WKH GHPDQGV RI WKH IXWXUH ZLWKRXW LPSDFWLQJ WKH VXUURXQGLQJ DUHD :H DOVR introduced new environmentally-responsible equipment to the terminal, including electric cantilevered rail mounted gantry cranes, regenerative ship-to-shore cranes, and ORZ HPLVVLRQ UXEEHU W\UHG JDQWU\ FUDQHV 7KHVH LQLWLDWLYHV DUH DOO SDUW RI RXU *OREDO &RPPLWPHQW WR PDNH WKH 3RUW RI 9DQFRXYHU WKH PRVW VXVWDLQDEOH SRUW LQ WKH ZRUOG To learn more about our responsible stewardship, please visit globalterminals.com/sustainability.

globalterminals.com

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@BigShipReady

2018-04-03 11:35 AM

We’re charting a bold course.

The Port of Vancouver is a critical gateway for Canadian trade, providing access to 170 global markets.

We’re on a journey to create a better port: working to ensure efficient port operations, proactively respond to local communities, and maintain a healthy environment as the port grows. It’s a challenging balance, but is necessary to ensure Canada, and your business, continue to prosper well into the future.

Learn more about our vision to be the world’s most sustainable port at portvancouver.com/sustainability.

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CONTENTS 2018 | THE B.C. PORT MAGAZINE

GATEWAY

FEATURES Port data Shipping on course for recovery Think globally, trade regionally Pulse points: specialty grain boom Port in a storm New life for New Brighton Driving force Pam Ryan: roadwork ahead Cybercrime wave Cleaning up nicely Truckers awakening to new tech realities Vancouver harbours global shipping hub aspirations Stilling the waters Making the connection Safe passage Port promoting from within Clearing the air

6 8 12 14 16 18 22 24 26 29

SHIPPING HORIZON BRIGHTENS THE ASIAN EQUATION

NAVIGATING SUPPLY CHAIN ISSUES: CHALLENGES, OPPORTUNITIES

OUTLOOK

32 34 36 38 40 42 44

NEW LIFE FOR NEW BRIGHTON

18

A partnership between the Vancouver Fraser Port Authority, parks board and three local First Nations is restoring a critical piece of coastal wetland habitat on the south shore of Burrard Inlet

PORT PROMOTING FROM WITHIN

MAKING THE 38 CONNECTION

Internal hires and word of mouth helping address ongoing shortage of waterfront workers

42

Vancouver and Prince Rupert ports win first-in-Canada distinctions for shore-power environmental initiative

Editor’s note Disruption looms large on the horizon for major transportation gateways in B.C. and elsewhere around the world.

That’s a good-news-bad-news forecast. The good news for cargo movement: disruption could create enormous marketplace efficiencies. The bad news: the shipping sector is not traditionally big on timely adoption of technological change.

As it is with the increasingly large vessels that carry containerized cargo on major international trade routes, altering course mid-voyage takes time.

Automation, blockchain technology, shipping line overcapacity, low-sulphur fuel regulations, cybercrime and bigger ships at fewer ports are all serious issues facing supply chains.

But PwC has estimated that artificial intelligence, robotics and other forms of smart automation could contribute approximately US$15 trillion to the global economy by 2030.

How ports on B.C.’s West Coast and elsewhere in North America incorporate technological change in their operations will determine their long-term

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CYBERCRIME WAVES FIRST NATIONS INITIATIVES

competitiveness and success.

This year’s Gateway looks at some of those technology issues along with port environmental initiatives and challenges.

As always, local, regional and global economies will also have a major impact on B.C.’s trade gateways.

At the tail end of 2017 and the start of 2018, economists were largely positive about shipping’s prospects for the year ahead. U.K.-based Oxford Economics raised its global GDP growth forecast to 3.1% from 3% as its analysis noted that the global economy might have entered “a sustained period of stability.”

Add in an ability for ports and supply chain companies to harness the multifold benefits of the digital revolution and prospects are bright for the business of trade corridors and gateways, which is fundamental to the economic well-being of Canada’s standard of living.

INFRASTRUCTURE

PROFILE

TECHNOLOGY

ENVIRONMENT

PUBLISHER: Sue Belisle EDITOR-IN-CHIEF, BUSINESS IN VANCOUVER; VICE-PRESIDENT, GLACIER MEDIA: Kirk LaPointe EDITOR: Timothy Renshaw INTEGRATED SALES MANAGERS:

Pia Huynh, Laura Torrance, Chris Wilson

DESIGN: Randy Pearsall PRODUCTION: Rob Benac WRITERS: Nelson Bennett,

Patrick Blennerhassett, Chuck Chiang, Evan Duggan, Peter Mitham, Tyler Nyquvest, Tyler Orton, Timothy Renshaw, Jan-Christian Sorensen, Hayley Woodin PROOFREADER: Meg Yamamoto OPERATIONS MANAGER: Michelle Myers ADVERTISING SALES: Benita Bajwa, Dean Hargrave, Blair Johnston, Corinne Tkachuk NATIONAL SALES: Shirley Moody ADMINISTRATORS: Katherine Butler, Marie Pearsall RESEARCH: Anna Liczmanska, Carrie Schmidt Gateway 2018 is published by BIV Magazines, a division of BIV Media Group, 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6, 604-688-2398, fax 604-688-1963, www.biv.com.

Copyright 2018 Business in Vancouver Magazines. All rights reserved. No part of this book may be reproduced in any form or incorporated into any information retrieval system without permission of BIV Magazines. The publishers are not responsible in whole or in part for any errors or omissions in this publication.

ISSN 1205-5662 Publications Mail Agreement No.: 40069240. Registration No.: 8876.

Return undeliverable Canadian addresses to Circulation Department: 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6 Email: subscribe@biv.com Cover: Romakoma/Shutterstock

PRODUCED BY

Timothy Renshaw trenshaw@biv.com @timothyrenshaw

2018-04-03 11:35 AM

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

Port data

Import and export tonnage through Prince Rupert, Nanaimo and Vancouver

Deployed annual capacity

100,000,000

90,000,000

Un

ite Chin dS a ta te s Ja pa n In Re di pu a bl I ic ta of l y Ko re a Sp ai n Ta Un iw ite d A M an ra ex b E ic m o ir Ge ate rm s Un Au any ite st d rali Ki ng a d Pa om na Vi ma et na Ca m na da

TEUs (millions)

90 80 70 60 50 40 30 20 10

Foreign

80,000,000

Domestic

SOURCE: UN CONFERENCE ON TRADE AND DEVELOPMENT

70,000,000

Domestic vessel deployment in TEUs 60,000,000

50,000,000

40,000,000

Un

ite Chin dS a ta te s Ja pa n In Re di pu a bl I ic ta of ly Ko re a Sp ai n Un Ta ite iw an dA ra Me b E xic m o ira Ge tes rm Un Au any ite st d rali Ki ng a d Pa om na Vi ma et na Ca m na da

Per cent

90 80 70 60 50 40 30 20 10

SOURCE: UN CONFERENCE ON TRADE AND DEVELOPMENT

30,000,000

Port ranking: fastest growth in TEUs (2011-16) Ranking change

5

20,000,000

4

Import tonnage

3

Export tonnage

2 1

10,000,000

0

Pr

on

M

in

ce R

up

er t tre M a l an za ni llo Ha lif Sa ax nD ieg o Ta Lo mp sA a ng Ne e w Lon les Yo gB rk /N eac ew h Je rs ey Sa va n Ja n M cks ah et on ro v Va ille nc ou ve r Ho us to n

-1

2016 2015 2012 2016 2015 2012 2016 2015 2012 Prince Rupert

|

Nanaimo

|

Vancouver

SOURCE: AMERICAN ASSOCIATION OF PORT AUTHORITIES

Import and export tonnage through Prince Rupert and Nanaimo

80 70 60 50 40 30 20 10

Pr in ce Ru pe M rt an za ni llo Sa nD ieg o Ta m p Sa a va nn ah Ha lif a M et Hou x Ne ro s Va ton w Yo n rk cou /N v ew er Je rs ey Lo ng Be Lo a s A ch n Ja gele ck s so nv ille M on tre al

Per cent

Change in TEUs (2011-16)

SOURCE: AMERICAN ASSOCIATION OF PORT AUTHORITIES

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4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000

Import tonnage Export tonnage

2016

2015 2012 Prince Rupert |

2016

2015 Nanaimo

2012

SOURCE: PORT STATISTICS

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Change in import tonnage for B.C. ports 180

Total tonnage through Canadian ports 140,000,000

160

120,000,000

140 100,000,000

Per cent

120 100

80,000,000

80 60,000,000

60 40

40,000,000

20

20,000,000

0

One-year change (2015-16)

Va nc o M uve on r t Qu rea l Pr Se ebe in pt c ce -Il e Sa Rup s in er tJ t Th Ham ohn un ilt de on rB Ha ay Na lif n ax Tr W aim oi in o s- ds Ri o Be viér r lle es d To une St ron Po . Jo to r t hn A l 's b Os e r n Sa ha i gu wa en ay

ve r Va nc ou

o im na Na

Pr in ce Ru pe rt

-20

Five-year change (2012-16)

2010

SOURCE: PORT STATISTICS

2016 SOURCE: NANAIMO PORT AUTHORITY

Change in export tonnage for B.C. ports

Canadian seven-year tonnage growth (2010-16)

35

150

30 25 100

15 10

50

Per cent

5 0 -5

0

Va nc ou ve r

o Na na im

SOURCE: PORT STATISTICS

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in t

Five-year change (2012–16)

Sa

One-year change (2015-16)

-50

Jo

Pr

in ce R

up e

rt

-15

hn

-10

N Po ana rt im Al o b Os ern ha i M Th on wa un tr de eal r To Bay ro Pr St. J nto in oh ce n Va Rup 's nc er ou t v Tr oi Que er sRi bec Be vié lle res d Se un pt e W Ile in s d Ha sor Ha lifa x Sa milt gu on en ay

Per cent

20

-100

SOURCE: NANAIMO PORT AUTHORITY

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

SHIPPING OUTLOOK

SHIPPING ON COURSE FOR RECOVERY But major hazards ahead in tech disruption, economic nationalism

TIMOTHY RENSHAW

C

louds lifting, calmer seas returning. But the 2018 marine forecast for transpacific and other major shipping trade routes also notes that full recovery from the dark days of 2015-16 depends on a number of political, economic and technological factors.

Atop that list for Canada: uncertainty over the outcome of North American Free Trade Agreement (NAFTA) negotiations, the street-level impact of the CanadaEuropean Union Comprehensive Economic and Trade Agreement (CETA) and rapidly evolving technologies that promise to disrupt global supply chains.

There is also the China factor.

“I know analysts have been harping on about it for years,” says Transport Intelligence Ltd. economist David Buckby, “but I think given what the Chinese government has said following the 19th [Communist] Party congress – that it will be switching focus from meeting long-run economic growth targets to other objectives – coupled with recent comments on trying to manage down debt, there is a real chance that Chinese growth will stutter.”

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Buckby says the slowdown might not occur in 2018, but it will likely happen over the next few years.

“As the linchpin of so many global supply chains, what affects China is going to impact the rest of the world.

I don’t know exactly when that’s coming, but when it does, I think it will adversely impact global port volumes quite significantly.”

In a late-January container market and freight rate webinar, U.K.-based shipping consultancy Drewry estimated that an additional nine million 20-foot equivalent units (TEUs) will need to be shipped this year as projected global container cargo growth in 2018 will be 4%. That’s down from 6.3% in 2017.

McKinsey & Co.’s Container Shipping: The Next 50 Years also points to warning signs about China’s retooled economic development model. It estimates that

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the swing away from exports of goods to a model based on consumption and services has coincided with a drop in China’s real gross domestic product to between 6% and 7% from more than 10%.

Asia, and China especially, are major containerized-shipping drivers. Asia accounted for 64% of the world’s container throughput in 2016, and McKinsey notes that China imported and exported 52 million TEUs in 2015 compared with 13 million in 2000.

It also maintains that China’s dramatic growth and the resultant boom in container trade over the past three decades is unlikely to be repeated elsewhere in the world.

But John Murnane, a partner in McKinsey’s travel, transport and logistics practice, notes in an email response to Business in Vancouver that in the near term, continued growth in container-shipping demand is likely.

“The U.S. and Canada continue to grow strongly, and volumes in 2017 outpaced expectations. This is good news for all ports and terminals. We expect 2018 to continue this strong volume growth.”

Oxford Economics agrees.

The U.K.-based economic research company raised its global GDP growth forecast to 3.2% in 2018 from 2.9%

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in 2017 based on what it sees as a continuing strong performance of the world economy and positive “omens for 2018.” Its December 4 global outlook research briefing points to four key reasons for that optimism: strong trade growth, low inflation, robust emerging markets and resilience to political uncertainty.

In a November brief, it also revises its world trade forecast up 0.5 percentage points to 4.2%.

Oxford Economics’ forecast for Canada predicts that exports will rise 2.9% in 2017 and 4% in 2018. It sees imports up 3.7% in 2017 and 2.4% in 2018, but Canada’s GDP growth slipping to 2.1% in 2018 from 3% in 2017.

The International Monetary Fund’s World Economic Outlook, meanwhile, projects global economic growth of 3.6% for 2017 and 3.7% in 2018.

In its 2017 nine-month financials, Hapag-Lloyd, the world’s fifth-largest ocean container company, notes that global container-shipping volume from 2018 through to 2021 is projected to increase between 4.8% and 5.1%.

However, disruptive technology will continue to complicate the market for Vancouver’s Seaspan Corp., the world’s largest independent charter owner and manager of container ships, and other companies that

A bulk cargo ship heads west from Burrard Inlet. Analysts see continued growth in transpacific ship traffic for 2018 | ROB KRUYT

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

Shipping on course for recovery

Bulk cargo ships loading at grain elevators in Burrard Inlet | CHUNG CHOW

service the container-shipping industry.

For example, McKinsey notes that advances in robotics and 3D printing using metals, ceramics and other materials could shrink supply chains by localizing manufacturing and eliminating labour cost gaps in other parts of the world.

Miniaturization, it adds, could also reduce container-shipping demand.

The United Nations Conference on Trade and Developmentâ&#x20AC;&#x2122;s Review of Maritime Transport 2017, meanwhile, points to CETA and the economic partnership agreement

concluded between Japan and the EU in July as positive developments for global trade and shipping. It adds that the growth of cross-border e-commerce could also drive long-term container-shipping demand.

However, it notes that a sustained recovery will require a strong commitment to â&#x20AC;&#x153;coherent and co-ordinated multilateral policies.â&#x20AC;?

It also red-flags the growing cybersecurity threats to world shipping supply chains.

While Buckby agrees that CETA will benefit port volumes, he doubts that it would significantly increase cargo through Vancouver and other Canadian ports. â&#x20AC;&#x153;The dirty secret of many free-trade deals is that they donâ&#x20AC;&#x2122;t tend to have a substantial economic impact, especially if they just address tariffs, which tend to be low anyway, and donâ&#x20AC;&#x2122;t focus much on breaking down non-tariff barriers.â&#x20AC;?

Buckby adds that port volumes would drop if NAFTA collapses. â&#x20AC;&#x153;And even if it is successfully renegotiated, supply chains still face disruption, thanks to possible changes to rules of origin.â&#x20AC;?

A report released in late November by A.T. Kearney, a global management consulting firm, estimates that tariff increases in the wake of a failure to renew NAFTA could cut retail sales in Canada by $17 billion and chop up to $25 billion from retail-sector gross margins.

However, the key challenge in 2018 for ports in B.C.

A proud member of the Vancouver waterfront since 1959.

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and elsewhere in North America, according to analysts, will be similar to what it was in 2017: how to handle larger containers ships.

“This is relevant to both coasts,” Murnane says.

“Liners are now deploying up-to-13,000-TEU container ships to the U.S. West Coast. It is beyond the capability of some smaller terminals to welcome and unload these vessels.”

The newly widened Panama Canal has also opened the way for larger transpacific ships to reach East Coast ports directly. Infrastructure and operations in those ports consequently face similar pressures.

Murnane points out that port productivity suffers because a mega-container ship can take up to five days to unload.

“Some ports are rising to the challenge and investing, but smaller ports and constrained ports risk losing some mainline services.”

According to Walter Kemmsies, managing director, economist and chief strategist of Jones Lang LaSalle’s U.S. ports, airports and global infrastructure group, container cargo traffic to North America’s West Coast will continue to grow in 2018 but so too will the migration of more transpacific container traffic to Gulf and East Coast ports.

Among the reasons for that cargo diversion south and east, says Kemmsies: West Coast port congestion and importers’ investment in building distribution

centres in the Gulf Coast area as ocean carriers launch direct services to China, Japan and other north Asian countries.

Kemmsies adds that economic nationalism and geopolitical risks to global shipping and trade will remain high in 2018. É

A $300 million improvement project at GCT Deltaport at Roberts Bank will expand its annual container-handling capacity 33% | ROB KRUYT

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

SHIPPING OUTLOOK

PAUL EVANS PROFESSOR OF ASIAPACIFIC AFFAIRS, INSTITUTE OF ASIAN RESEARCH, UNIVERSITY OF BRITISH COLUMBIA

With ASEAN, Canada has been trying to up its game in the last two or three years, and certainly in the last year, since Mr. Trump came to power. I think most of us think it’s important to support organizations and regional groupings, because on balance, they might just be a part of the solution as a bridging system, especially as a great power like the United States steps back while another – China – steps in

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THINK GLOBALLY, TRADE REGIONALLY Canada needs to develop stronger and deeper integration into regional cargo trade networks around the world, observers say

CHUCK CHIANG

B

ritish Columbia businesses need to do more to integrate themselves into increasingly powerful regional trade networks such as East Asia or the eurozone as manufacturing chains everywhere slowly shift away from a global flow of goods to a more regionalized model, economists and industry officials say.

That’s because the global flow of physical materials and goods is now increasingly being replaced by the movement of something else – information – that not only allows manufacturers to scale back the areas in which they engage in the physical exchange of goods, but also creates real-time consumer demand information that requires more flexibility from companies serving a certain market.

“What we are seeing in the world is the shift from global product flows to regional product flows, replaced globally by an information flow that comes with disruptive technology that’s happening in every industry right now,” says Ivey Business School Prof.

Andreas Schotter, who worked previously in China as a top executive.

“As technology advances, it’s no longer necessary to move big products around the world on these integrated value and manufacturing chains,” he adds. “There are still integrated value chains, but they are not flowing globally anymore. They are flowing regionally. So Canada needs to think strategically about how we connect with all the regions.”

Canada has been rising to that challenge, says Paul Evans, professor of Asia-Pacific affairs at the University

of British Columbia and interim research director at the school’s Institute of Asian Research. He notes Ottawa has been wooing members of the Association of Southeast Asian Nations (ASEAN), a group that includes Vietnam, the Philippines, Thailand, Malaysia and Indonesia, since Donald Trump’s election in the United States refocused Canadian efforts outside of North America.

“With ASEAN, Canada has been trying to up its game in the last two or three years, and certainly in the last year, since Mr. Trump came to power,” Evans says. “I think most of us think it’s important to support organizations and regional groupings, because on balance, they might just be a part of the solution as a bridging system, especially as a great power like the United States steps back while another – China – steps in.”

China is another focal point of Ottawa’s intentions to get deeper into regional trade, notwithstanding the expected start to formal free-trade agreement discussions being scuttled after a rougher-than-expected meeting between Prime Minister Justin Trudeau and Chinese Premier Li Keqiang in Beijing in early December.

On a recent trip to Vancouver, Canadian ambassador to China (and former senior federal Liberal MP) John

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McCallum described his meeting with Chinese leader Xi Jinping last year.

“There are many opportunities for Canada and China to do more together, in agriculture, in energy, in environment … a long list of areas,” McCallum says.

“So we summarized that we want to do more in both directions, and I said, ‘More, more, more.’ He [Xi] seemed to agree.”

Of particular interest, he adds, was China’s aggressive One Belt, One Road (OBOR) initiative, which aims to build trade infrastructure linking China with Europe by rail through Central Asia or via seaports in South and Southeast Asia, the Middle East and East Africa. McCallum says some Canadian businesses recently met with Chinese officials on OBOR, and he is hoping that something concrete will be the result.

“I thought the OBOR initiative is probably the biggest initiative undertaken by any country that I’m aware of,” he says.

“It’s certainly bigger than the United States’ Marshall Plan, which rebuilt Europe after World War II. So it’s huge; it’s massive. And it is something in which I hope Canadian companies will be involved.”

Statistics appear to support the idea of a shift in global trade trends toward regional focal points. According to the World Trade Organization (WTO), global merchandise trade volumes grew by a paltry 1.3% in 2016, and the International Monetary Fund figure for global export volume growth from 2008 to 2015 sits at only 2.9% – less than half of the rate recorded from 2001 to 2008. The WTO projection for this year’s growth rate is 2.4% but placed in a range of 1.8% to 3.6% due to uncertainties with rising protectionist policies.

The new, information-centric model, dubbed “Industry 4.0” by officials in countries such as the United States, Germany and South Korea, calls for the injection of data analysis into every step of the business value chain, from material procurement and manufacturing to the

International trade is changing as the flow of products becomes more regionally oriented with the advent of digital technology in supply chain management and the emergence of 3D printing and other manufacturing technology | TERENTYEVA/ SHUTTERSTOCK

delivery of goods. It requires countries like Canada to boost their on-the-ground presence in regional chains, one Korean official says.

“What it means is that manufacturing in one country cannot survive by itself,” says Bae Kyounghan, vice-president of the Korea Smart Factory Foundation, a government-backed effort to promote the new informationdriven economic model. “You have to work with other markets, not just the traditional big players.

Smart factories are a huge trend that everybody is facing, and the basic idea is that everyone shares in the information that new technology generates … and apply it to the situation in your own market.”

Ivey’s Schotter does note that in light of more protectionism from markets like the United States and more populist nationalism in markets like China, the challenge of getting into regional networks is becoming tougher, with Canadian companies needing to watch their own bottom lines very carefully in reaching out of their comfort zones.

A key part of that process is the protection of those Canadian businesses from acquisition, because the goal is for them to help Canada pursue regional opportunities around the world – not to become a means of expansion for foreign firms.

He adds that Canada’s multicultural society can be a big advantage for Canadian companies’ advances into regional networks – but only if used correctly. Schotter cites Canada’s Filipino community, among the country’s largest ethnic groups, as an example.

“The Filipino case is interesting,” he says. “We’ve had this demographic traditionally anyways, but it’s still rising. So how are we connecting with that region? How do we take advantage of our eclectic, multicultural society to connect back with the world? It seems that everyone coming to Canada is happy to be here, but how about that diaspora reconnecting [with its country of origin] and creating opportunities for Canada at every level?” É

Expert logistics for a complicated world.

Prince Rupert

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Vancouver

Nanaimo

dpworld.ca |

@DPWorldCanada

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

PORT INFRASTRUCTURE AND OPPORTUNITIES

PULSE POINTS:

SPECIALTY GRAIN BOOM Market up for containerized grain shipments, but global competition could eat into B.C. business

TYLER NYQUVEST

C Columbia Containers general manager Dean Giles: “pulses are getting stronger in the world market, volumes are growing, crop quality and genetics are improving and there are more volumes coming to the West Coast” | TYLER NYQUVEST

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ontainerized shipping of specialty grains and pulses is a rapidly expanding market in North America and around the world. According to the Vancouver Fraser Port Authority, grain, specialty crops and feed accounted for 23% of bulk volumes in 2016 out of the Port of Vancouver. That’s up from 19% in 2012.

Recently, Quebec-based Ray-Mont Logistics expanded its operations with a new facility at the Port of Prince Rupert to handle the increased volume of speciality grain being exported from B.C. Created through a partnership with Canadian National Railway Co. and the Port of Prince Rupert, it opened at the south end of the Ridley Island industrial site in 2017.

The terminal unloads Canadian lentils, dried peas and other pulse crops delivered via rail and loads them into containers that are loaded on ships for export.

Ray-Mont’s expansion makes it one of the only stuffing facilities on Canada’s West Coast.

“The reason why we expanded into Prince Rupert is because the influx of exports leaving Canada was becoming congested out of Port of Vancouver,” says Loui Stathatos, vice-president and chief commercial officer

at Ray-Mont Logistics International. “Last season, we were unable to fulfil the needs of our customers due to demand.”

Ray-Mont’s additions come at the end of a near 60% increase in expansion at DP World’s Fairview container terminal, a culmination of two years of construction that added not just terminal improvements but also container and transload operations that ensure Canadian exports find their way into the system.

Vancouver-based Columbia Containers is another major local player in the specialty grains sector.

“There are approximately three million-plus tonnes of grain container movement out of the West Coast,” says Dean Giles, the company’s general manager. “In our business, approximately 50% of our container volume is pulses. The rest is other grain products like canola,

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Ray-Mont Logistics opened a new facility in the Port of Prince Rupert in 2017 to handle increased exports of specialty grains | SUBMITTED

barley … those kinds of things.”

Pulses are the dried seeds of plants in the legume family and include chickpeas, dried peas, lentils and edible beans. They are high in protein and fibre.

“Pulses are getting stronger in the world market, volumes are growing, crop quality and genetics are improving and there are more volumes coming to the West Coast,” Giles says.

Columbia and Ray-Mont remain Canada’s top two competitors in the sector due to their location and facilities, which will help them stay on top of the market, Giles says.

“It is a larger capital investment to get into the container business. It requires lots of land and the Lower Mainland land is expensive; all the containers need to get to a container loading facility.… Trucking costs are high so the closer you are to a terminal, your trucking costs are that much lower.”

B.C.’s growing interest and investment in specialty grains and pulses is, however, at risk due to factors inhibiting international trade.

“The market with India today has been a challenge,” Giles says.

India is one of the world’s biggest importers of peas and lentils, and Canada is the top grower of pulse crops.

Peas and lentils are vegetarian diet staples and are common ingredients in Indian dishes.

“The global pulse market has been affected by a dramatic change in India’s support policy for farmers, which has increased import duties for wheat by 10% and for pulses 50%,” says Gordon Bacon, CEO of Pulse Canada.

Pol itica l u ncerta i nty has prompted ma ny

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Indian politicians to seek support by promoting buylocal policies.

“Because India is the world’s biggest importer of pulses, this shift in domestic farm support has had an impact in the short term on pulse prices, and that’s in part due to a large domestic crop in India but also this shift in policy,” Bacon says.

Another issue stems from India’s increased imports from regions such as Europe as international players become more formidable competitors.

“Canada in general is starting to see a lot of competition,” Stathatos says. “We always know when dealing with international business there are always going to be challenges between natural disasters and political disasters. I think we have had our hands full for the last decade.”

Yet industry professionals are optimistic about new markets emerging.

“I think China is a huge market for growth,” Bacon says. “In 2015, China was the largest market for Canadian yellow peas, and each year comes a close second behind India.

“We just returned from China and have seen massive investment in the pea [processing] business, and we are also seeing some very interesting developments shift in formulation products in China – for example, noodles.”

Bacon says many Chinese companies are beginning to introduce noodle lines that contain pea flour and other Canadian-grown ingredients.

“China is entering a new stage of development, and variety and quality of food are cited as government priorities.” É

2018-04-03 11:35 AM

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

PORT INFRASTRUCTURE AND OPPORTUNITIES

PORT IN A STORM A rapidly dwindling supply of port industrial land threatens to stall expansion of Port of Vancouver shipping operations PETER MITHAM

BAKTASH KASRAEI SENIOR SALES ASSOCIATE, JONES LANG LASALLE

I think we’re at a tipping point

T

ucked between blueberry fields and the riverfront, the industrial properties east of No. 6 Road in Richmond are among the last large-scale logistics sites north of the Fraser River.

Once home to Richmond’s municipal landfill, the properties are in demand for port-oriented development as part of a larger focus on the lower reaches of the Fraser, which are deep enough to receive ocean-faring vessels from Asia, while transloaded shipments head via truck to destinations across the region and points east.

The opportunity to support that activity prompted Montrose Property Holdings Ltd. to launch Richmond Industrial Centre, a new 170-acre industrial development.

“It’s been a long-term project,” says Tom Land, president and CEO of Montrose, which he created in 2015 to guide redevelopment of the 40-year-old Ecowaste Industries Ltd. landfill site at the end of Williams Road.

“We realized that there was an opportunity and a need in the region for industrial land [so] we went back in 2013 to finish up this particular piece of property and get it ready for its future life as an industrial park,” he explains.

While the northern portion of the landfill will continue operating, the southern portion will become home to 2.8 million square feet of tilt-up warehouse space constructed on a build-to-suit basis. Rents at launch were in the range of $9 per square foot, below the market average identified in a Jones Lang LaSalle (JLL) survey

00_Gateway 2018_48p_00.indd 16

of port facilities in North America.

According to JLL, asking rents for port space in Vancouver average $10.65, the lowest of any major West Coast port. Port-market vacancies, meanwhile, are less than 5% (according to Colliers International, industrial vacancies across Metro Vancouver now average less than 2%).

Rents at Montrose’s development are on par with the Richmond average, which Colliers pegs at $9.06. Land thinks that’s appropriate, but he sees rents increasing as local industrial space – among the least-available in North America as it is – becomes even more scarce.

“We’re really targeting a larger tenant – 100,000 square feet and up,” he says. “Probably in the not-toodistant future we will start to see rates for these larger buildings start to increase, and it wouldn’t surprise me to see them in the $10-plus range in the next four

2018-04-03 11:35 AM

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or five years.”

A taste of where things are heading is the industrial zones around Burrard Inlet, where lease rates have surged past $15 a square foot. Rates at Oxford Properties Group’s Riverbend business park in Burnaby’s Big Bend area are now well into the teens, from $9 a square foot when the project launched in 2016.

“The market is very tight. I think we’re at a tipping point now,” says Baktash Kasraei, a senior sales associate with JLL’s supply chain logistics group in Vancouver.

“There’s no options, so the landlords have caught on and rates are going to be pushing up.”

Rising rates are a symptom of what brokers have for years urged municipal leaders to address: a lack of industrial land for future development. While lease rates may be low relative to other West Coast ports, ships landing at Vancouver are coming here because it’s the gateway to Canada. And if there’s no space left to handle goods, then the gateway shuts.

“Our biggest risk is not being able to accommodate [demand], not that we’re getting too expensive,” says Chris MacCauley, a senior vice-president with CBRE Ltd. who has also worked with commercial real estate association NAIOP to assess the severity of the shortage.

Once upon a time, companies could look farther up the Fraser Valley for space. Now, industrial markets in Abbotsford and Chilliwack are as tight as points

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Tom Land, president and CEO of Montrose Property Holdings Ltd. Montrose is responding to the region’s demand for industrial land by redeveloping a former landfill site in Richmond | CHUNG CHOW

farther west.

“There’s nothing available out there,” MacCauley says.

“It’s not like we can say, ‘Just go farther east.’ Now we’re getting to the point where if you’re going to go farther east, you’re going to go over a province.”

Alberta has long been a favoured destination for companies setting up distribution centres to serve outlets across Western Canada. Now, there’s an even greater financial incentive, with Calgary land costs being half what they are in Vancouver.

“We’re seeing assets that should be bought here, activity happening here, shifting into cheaper markets like Calgary,” says Matthew Boukall, a senior director with real estate consulting firm Altus Group. “Basically, it’s cheaper to buy acres of land in Alberta, ship the product out of Vancouver and then bring it back in trucks.”

Companies aren’t going to route product through Prince Rupert or Seattle if there’s no space available in Vancouver, MacCauley says. Both ports are geared towards U.S. markets. Vancouver is the gateway to Canada’s heartland, and companies will ship cargo east for processing if facilities aren’t available on the coast.

“We may be competitive against them if we were competing to service the same market, but we’re not,” he says of Prince Rupert, Seattle and other West Coast ports.

“What we need to be worried about is, are we competitive with Calgary? Because we’re servicing Canada.” É

2018-04-03 11:35 AM

18 |

GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

PORT INFRASTRUCTURE AND OPPORTUNITIES

NEW LIFE FOR

NEW BRIGHTON

A partnership between the Vancouver Fraser Port Authority, Vancouver parks board and three local First Nations is restoring a critical piece of coastal wetland habitat on the south shore of Burrard Inlet

JAN-CHRISTIAN SORENSEN

A

collaboration between the Vancouver Fraser Port Authority, the Vancouver Board of Parks and Recreation and three First Nations bands is breathing new life into New Brighton Park and restoring and enhancing a high-value parcel of shoreline habitat.

The rehabilitation project, which relied heavily on the input and involvement of the nearby Musqueam, Squamish and Tsleil-Waututh First Nations during the two-year planning and construction process, began with more than 20,000 cubic metres of material being removed from the 10-hectare park that was created in the 1960s when a critical wetland area was infilled on the south shore of Burrard Inlet, in the shadow of the

00_Gateway 2018_48p_00.indd 18

Second Narrows Bridge.

After the fill was removed, an extensive planting program â&#x20AC;&#x201C; informed with Aboriginal input â&#x20AC;&#x201C; was launched that saw the removal of invasive species and seeding of approximately 25,000 salt marsh grass plugs, 200 native trees and 4,000 coastal shrubs on the banks surrounding a two-hectare section of wetland. The planting process incorporated indigenous plants such as salmonberry,

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Sitka willow and ocean spray that were traditionally gathered by First Nations ancestors for a variety of nutritional, medicinal and ceremonial uses.

The primary aim was to re-create a salt marsh that would prove to be a high-value habitat for fish, birds and other wildlife, with the secondary goal of improving public access to nature via construction of viewing decks, pathways and benches as well as providing visitors to the park with signage to illuminate the ecological and historical importance of the area to local First Nations.

The construction of the salt marsh helped to restore a portion of natural marine habitat that once offered important refuge for juvenile chum and chinook salmon, which have been known to experience high rates of mortality as they migrate from Indian Arm and the Seymour River on the North Shore through Burrard Inlet on their way out to sea. The salt marsh restoration is also

00_Gateway 2018_48p_00.indd 19

The newly built salt marsh at New Brighton Park will restore natural marine habitat for juvenile chum and chinook salmon as well as various types of shorebirds, songbirds and waterfowl and marine mammals and invertebrates | ABOVE: VELTUS PROMOTIONAL MEDIA; LEFT: VANCOUVER FRASER PORT AUTHORITY

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

New life for New Brighton

New Brighton Park offers both recreation opportunities and marine habitat, after a recent rehabilitation project involving the Vancouver Fraser Port Authority, the Vancouver parks board and three local First Nations bands | CHUNG CHOW

expected to provide a productive intertidal, in-stream and riparian habitat for various types of shorebirds, songbirds and waterfowl as well as marine mammals and invertebrates. â&#x20AC;&#x153;We incorporated traditional and cultural [First Nations] use into the planting program, and their involvement played a key role in the overall design and delivery and creating a project that everyone could be proud of,â&#x20AC;?

$5 Billion DĹ˝Ä&#x161;Ä&#x17E;Ć&#x152;ĹśĹ?Ç&#x152;Ä&#x201A;Ć&#x;ŽŜÍ&#x2014; ŽžĆ&#x2030;ĹŻÄ&#x17E;Ć&#x161;Ä&#x17E; tÄ&#x17E;Í&#x203A;Ć&#x152;Ä&#x17E; ZÄ&#x17E;Ä&#x201A;Ä&#x161;Ç&#x2021; &Ĺ˝Ć&#x152; tĹ&#x161;Ä&#x201A;Ć&#x161;Í&#x203A;Ć? EÄ&#x17E;Ç&#x2020;Ć&#x161;Í&#x2DC;

says Charlotte Olson, project manager, infrastructure sustainability, for the port authority.

In an exhaustive report on the Tsleil-Waututh Nationâ&#x20AC;&#x2122;s history, culture and Aboriginal interests in the area compiled by archeological researcher Jesse Morin in 2015, oral history points to the area â&#x20AC;&#x201C; known as â&#x20AC;&#x153;KhaNah-Mootâ&#x20AC;? â&#x20AC;&#x201C; as the site of a Tsleil-Waututh village that was among a network of defensive lookout stations located throughout the area in the mid-1840s. In the same report, New Brighton Park is also pinpointed as the possible site for one of two origin events for a â&#x20AC;&#x153;different, now-forgottenâ&#x20AC;? Tsleil-Waututh lineage.

Olson is no stranger to the importance of tradition, culture and ecological stewardship of First Nations, having spent her childhood in Haida Gwaii before coming to Vancouver to attend Simon Fraser University and earn her degree in earth sciences. â&#x20AC;&#x153;I think this project was a great example of what can be achieved when you have a partnership like this and the port authority, parks board and Musqueam, Squamish and Tsleil-Waututh all work collaboratively to achieve something that really benefits all of us and aligns with all of our objectives, and our team continues to look forward to building on this by working with these partners and others on future habitat projects within port jurisdictions.â&#x20AC;?

Even before the New Brighton Park rehabilitation and restoration project was complete, the work that

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2018-04-03 11:35 AM

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From left, Vancouver Fraser Port Authority project manager Charlotte Olson, Vancouver park board chairman Michael Wiebe, Musqueam Nation representative Larissa Grant, Squamish Nation councillor Chris Lewis, Tsleil-Waututh Nation councillor Michelle George and port authority vice-president of infrastructure Cliff Stewart at the ribbon-cutting ceremony to mark the completion of the New Brighton Park shoreline habitat restoration project last September | VANCOUVER FRASER PORT AUTHORITY

all parties had contributed began paying dividends, with juvenile salmon spotted in the wetland after its reconnection to Burrard Inlet last spring, well ahead of construction’s end and the park’s official reopening in September 2017.

00_Gateway 2018_48p_00.indd 21

“That was one of the most exciting things for us, having salmon come into the park and utilize the wetland for the exact purpose it was created,” says Olson, who will continue to monitor the project to ensure that the wetland habitat meets its objectives. É

2018-04-03 11:35 AM

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

PORT INFRASTRUCTURE AND OPPORTUNITIES

DRIVING

FORCE One in every four jobs in Prince Rupert is related to port activities, report finds

00_Gateway 2018_48p_00.indd 22

2018-04-03 11:35 AM

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NELSON BENNETT

C

ompared with the Port of Vancouver, the Port of Prince Rupert is small in terms of volume. But for the Prince Rupert region, it is a disproportionately large economic engine, generating one out of every four jobs in the area. According to a 2017 InterVistas Consulting economic impact study, $35 billion worth of goods flowed in and out of the port’s terminals in 2016, generating $1 billion in economic activity, about one-quarter of which was wages.

In 2016, the port and related activities in trucking, rail and logistics directly employed 3,100 people – more than double the 1,300 employed in port-connected jobs in 2009. Half of those jobs are in Prince Rupert, which has a total labour force of 6,520.

“It’s almost a 140% increase in a matter of seven years,” says Ken Veldman, director of public affairs for the Prince Rupert Port Authority. “So the impact that that’s had here in Prince Rupert, and northern B.C., when you start looking at the rail, the trucking and the logistics that run through other communities like Terrace, Smithers, Prince George – it’s really a significant impact here.”

In addition to the Prince Rupert harbour, which handles break-bulk cargo such as logs, chemicals and fuels, there are five terminals under the port’s authority: ■Northland cruise ship terminal; ■Pinnacle Renewable Energy’s Westview wood pellet terminal; ■Fairview container terminal; ■Prince Rupert grain terminal; and ■Ridley coal terminal.

By 2020’s first quarter, the port will have a sixth: a new propane export terminal that AltaGas Ltd. is building at a cost of $500 million.

Cargo shipments through the port have fallen annually since 2013 while cruise ship traffic has increased, from 4,700 passengers in 2014 to 7,100 in 2016.

The drop in cargo volumes and value between 2013 and 2016 results directly from a steep drop in metallurgical (“met”) and thermal coal shipments.

Steelmaking and thermal coal prices fell sharply in 2011 due to a global glut and stayed low until around the beginning of 2017. Met coal shipments through Ridley Terminals fell to just four million tonnes in 2016 from 12 million tonnes in 2012.

Met coal prices have since recovered and export volumes have been rising since the beginning of 2017. As of October, shipments of both metallurgical and thermal coal were up to 6.2 million tonnes, compared with 2.8 million tonnes for the same period in 2016.

00_Gateway 2018_48p_00.indd 23

Facing page: The Fairview container terminal is one of five terminals under the jurisdiction of the Prince Rupert Port Authority | SUBMITTED

Despite the dramatic decline in coal shipments between 2013 and 2016, the port’s income for 2016 ($50.4 million) was nearly double that of 2015 ($26.1 million), according to the port’s most recent annual financial statements.

“Certainly the container business tends to have a significant revenue impact for us and that’s continued to improve,” Veldman says.

The Fairview container terminal opened in Prince Rupert 11 years ago and has allowed for more diversification of the types of products for export and import.

“There’s been a really significant growth story that’s happened here in 10 years but there’s also a significant diversification story,” Veldman says.

Container traffic accounts for about 39% of the value of all goods moving through the five terminals. About 33% of the container traffic is for lumber and other wood products, 31% is for grain, 13% for pulp and paper and 5% for agricultural products.

More and more volumes of lumber and agri-foods have been moving through the port to Asia.

“Where we’re seeing a real increase is in agri-food right now and that’s from all over the continent,” Veldman says. “Some of that is being stuffed into containers inland in Saskatchewan or even in the U.S. Midwest. Just recently we’ve actually had a new operator develop a logistics centre here that’s bringing in pulse and specialty crops in bulk unit trains by rail.”

The value of the imports moving through the port is about four times higher than that of exports. Many of the exports from both Canada and the U.S. are raw resources – coal, grain, minerals, wood products – while imports are higher-value goods such as auto parts and electronics. In 2016, the value of exports moving through the terminal was estimated at $4.7 billion to $6 billion, while the value of imports was $20.4 billion to $36.7 billion.

One major expansion at the port that has failed to take place is the development of multibillion-dollar liquefied natural gas terminals.

In 2016, Petronas pulled the plug on its $36 billion Pacific NorthWest LNG project. É

2018-04-03 11:35 AM

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

PROFILE

PAM RYAN:

ROADWORK AHEAD The founding and managing partner of Lucent Quay Consulting has worked on some of Metro Vancouver’s biggest transportation projects

HAYLEY WOODIN

PAM RYAN FOUNDING AND MANAGER PARTNER, LUCENT QUAY CONSULTING

You have to listen.

And I think that really sounds simple, but it’s the hard thing to do

00_Gateway 2018_48p_00.indd 24

S

itting just two city blocks away from Vancouver harbour, Canada Place and North America’s gateway to Asia, Pam Ryan admits that what she’s about to say might seem funny.

“I think my entire life has led me to transportation,” muses the founding and managing partner of Lucent Quay Consulting between glances out of the window and toward the water.

Next to the harbour is Ryan’s favourite spot in what she calls the best city in the world. Over the course of more than 25 years in the transportation sector, Ryan’s work has had a direct impact on the city and the surrounding region’s transportation landscape, though the consultant, strategist and facilitator sees it as much more than that.

“To me it’s fundamental to how people live their life, and to be part of making improvements in how people experience their life, it’s fascinating,” she says.

Over her career, Ryan has had a hand in work on the Port Mann Bridge, South Fraser Perimeter Road, Pitt River Bridge and Lions Gate Bridge rehabilitation project, to name a few of the multimillion-dollar initiatives she has lent her expertise to.

“Those are generational projects that have made a huge impact in the region,” says Ryan. “Roads bring economic development to impoverished nations. Transit can shape urban communities in amazing ways. The history of Canada is the history of the building of the railroad.”

Growing up, Ryan saw a lot of that history.

Born and raised (mostly) in Kamloops as part of a big family on a single income, vacations were road trips to destinations in British Columbia.

“I think about some of the places that I remember, and they’re all transportation focused,” says Ryan, mentioning trips to see the port – now just a short walk from

her Vancouver office – and the Last Spike driven into the Canadian Pacific Railway in Craigellachie.

Her family were also big board game players, and her favourite was Parker Brothers’ Wide World, where players are given a product, a country and a form of transportation and are left to strategize the logistics of goods movement.

“All my life I have wanted to go to Valencia to eat an orange,” says Ryan, who crossed that item off her bucket list in 2008 and has since fallen in love with Spain. “All my favourite board games had something to do with transportation. It’s like it’s been in my heart kind of forever.

Took my brain a little bit longer to catch up.”

Ryan says her brain eventually got there through process of elimination, closing doors to options she learned she didn’t like. Foundational to her career trajectory was her major in transportation and logistics as part of her University of British Columbia (UBC) bachelor of commerce degree.

Her studies took place at a time when airline deregulation had just completed, and trucking deregulation was just beginning.

“The things we were learning were kind of new and interesting, and we weren’t quite sure how they were going to roll out. That part was really interesting and it really attracted me to the policy side of transportation as

2018-04-03 11:35 AM

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Pam Ryan, founding and managing partner of Lucent Quay Consulting, in her favourite spot, in her favourite city | ROB KRUYT

INSIDE INFORMATION: PAM RYAN HIGHEST LEVEL OF EDUCATION: B.Com (TLOG) (transportation and logistics)

opposed to the more logistic side.”

She was a good student, and a keen one. At a scholarship awards event she met the then-general manager of BC Ferries, which led her to her first job.

“That kind of opened up everything to this multimodal, amazing world where I am today,” says Ryan, a self-described “fair-weather” cyclist who also drives, ride-shares and uses transit to get from point A to point B. It was at BC Ferries that Ryan discovered the consultation and engagement side of transportation, an area Lucent Quay Consulting specializes in, along with corporate planning and development, and marketing and communications.

“Although I’m still a transportation planner, I am consultation and engagement by choice,” says Ryan.

“It’s co-ordinating with people and understanding and hearing what they have to say and translating what people need to what engineers can understand. And making better decisions.”

Ryan leapt from five years at BC Ferries to two years at a big market research firm, followed by time at a small communications firm, before joining the team behind the 2000-02 rehabilitation of the Lions Gate Bridge – an $86.5 million contract that included replacing the bridge’s 60-year-old suspended structure. Ryan served as spokeswoman and media contact on the project for several years.

“This is where the rubber really hits the road and really, really influences people’s interests and availability. And then I went out on my own,” says Ryan. “I’m like: ‘This is what I want to do. I want to do big projects. I want to do things that have a big impact on people and do them the right way.’”

00_Gateway 2018_48p_00.indd 25

She didn’t set out to create Lucent Strategies per se, which merged with Quay Communications in 2015. Ryan first set her sights on work with big projects as part of a project team.

Lucent Strategies came in 2007, and today with Lucent Quay, her firm has an average of 20 projects on the go at a given time, depending on project size. Ryan, a former amateur kick-boxer who plays hockey and runs every morning with her dog, can typically be found in the office early getting ready for the day before anyone else arrives.

Recently, the firm worked with the Vancouver International Airport (YVR) to design and implement three phases of community and stakeholder engagement for YVR’s 2037 master plan. Lucent Quay is also providing TransLink and the City of Surrey with consultation support around the Surrey light-rail transit project.

As when she was at UBC, transportation in the 21st century is evolving dramatically, as are the transportation needs of Metro Vancouver. It’s a challenge, opportunity and responsibility that Ryan loves.

“Every time I go to Toronto now I hear the same kind of stories people used to say about Vancouver five, 10 years ago: ‘There’s huge boom going on there right now and all the stuff that they’re doing in transportation and in community development is pretty exciting.’”

Ryan adds that Lucent Quay now has an office of one in the country’s financial capital.

“You have to have an openness and a willingness to change if there’s a good reason to change,” says Ryan.

“It’s complicated. It’s a big mess, and you kind of have to pull those things apart to create something that works.

You have to listen. And I think that really sounds simple, but it’s the hard thing to do.” É

CURRENTLY READING: I always have too many on the go. Right now, I’m reading Kaizen: The Key to Japan’s Competitive Success and The LifeChanging Magic of Tidying Up, plus I’m rereading A Wrinkle in Time for about the 20th time FIRST ALBUM BOUGHT OR MUSIC DOWNLOADED: The

Police, Synchronicity – a timeless LP that I have to this day WHEN YOU WERE A KID, WHAT YOU WANTED TO BE WHEN YOU GREW UP: I have a vague

recollection of wanting to be a firefighter PROFESSION YOU WOULD MOST LIKE TO TRY: Brain

surgery TOUGHEST BUSINESS OR PROFESSIONAL DECISION:

Turning down work ADVICE YOU WOULD GIVE THE YOUNGER YOU: Confidence

comes from within. Don’t sweat the small stuff (and it’s almost always small stuff). Also, do you want to be right or do you want to be happy?

WHAT’S LEFT TO DO: Climb Kilimanjaro; give more

2018-04-03 11:36 AM

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

TECHNOLOGY AND LOGISTICS

CYBERCRIME

WAVE

Shipping industry players are often woefully underprepared as the sector faces growing attacks from ransomware and other forms of cyberattack

EVAN DUGGAN

RORY MACFARLANE PARTNER, INCE & CO.

I think the Maersk hack is just the tip of the iceberg

00_Gateway 2018_48p_00.indd 26

M

aritime trade lawyer Rory Macfarlane offers a hypothetical scenario that seems more like the plot of an action blockbuster than reality. But it’s a scene that’s becoming more plausible every day in the shipping industry.

The scenario unfolds with cybercriminals having hacked into a shipping company’s manifest system as a cargo ship approaches the Port of Vancouver. The hackers have altered the cargo manifest details to hide what’s really inside one of the containers. Perhaps it’s drugs; maybe it’s something far more dangerous – and neither the carrier nor port authorities know it’s there.

“Threat actors could get into port authorities’ systems and start changing the manifest details,” says Macfarlane, a partner at Ince & Co. law firm, who focuses on international trade law and cybersecurity.

“That creates a risk for shipping in that the nature of goods could be misdescribed, and maybe we could start to see dangerous goods shipped in containers when the ship operators don’t realize what’s really in them,” he tells Gateway on the phone from Hong Kong. “That could cause a problem.”

Last June, shipping giant A.P. Moller-Maersk felt the sting of the NotPetya virus, which took down the company’s operations, reportedly costing it up to US$300 million. By mid-August, Maersk admitted publicly that it was the victim of the ransomware cyberattack that mainly affected Maersk Line, APM Terminals and Damco. Maersk says the companies lost revenue because they couldn’t take customers’ bookings for two days following the attack.

“I think the Maersk hack is just the tip of the iceberg,” Macfarlane says.

Experts say situations like the one Maersk faced are happening more frequently than the public knows.

And while shipping firms and port authorities appear to be relying on discretion as part of their cybersecurity strategy, shipping is quickly falling behind and becoming more vulnerable to hacks, breaches and ransomware, say Macfarlane and other industry experts.

In shipping, maritime cargo firms, terminals and ports are lagging in cybersecurity, says Andy Davis, who leads the transport assurance practice at international cybersecurity firm NCC Group.

“A lot of that comes down to awareness,” he tells Gateway in a call from his office in the U.K. “We are seeing simple things like USB memory sticks ... on board of ships being used to update the charts on the [navigation] system and also for sharing videos with the crew members.”

Ships usually have industrial control systems for pumps and engines separate from bridge communication systems in which the captain can check email and browse the web, Davis says. “If those are separate systems, they are separate for a reason,” he says. “Plugging a device such as a USB memory stick into something in one network and then taking it over and plugging it into another network is enough to infect one or both of those with malware.”

Most of the unsafe cybersecurity practices stem from ignorance, Davis says.

“Some of it is down to the fact that trying to organize security awareness for crew members that spend 95% of their lives at sea can be challenging.”

In recent years, cyberattacks are becoming more about lining the hackers’ pockets than about gratifying their

2018-04-03 11:36 AM

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egos, says Konstantin Beznosov, a professor in the department of electrical and computer engineering at the University of British Columbia.

He says profit-seeking attacks are usually opportunistic, or by chance, rather than targeted.

“They’re basically looking for low-hanging fruit,” Beznosov says. “What’s most important for the company is not to be a low-hanging fruit. If they can be better than other organizations that have similar assets, then the criminals will go after other organizations because it will be cheaper for them to monetize their efforts.”

Maersk, after initially taking questions from Gateway, declined to comment about cybersecurity for this story.

Every other shipping firm Gateway reached out to, including Montreal-based Canada Steamship Lines, also declined an interview.

The Port of Vancouver and the Port of Prince Rupert also declined interviews about their cybersecurity strategies and preparedness, but did share some comments via email.

“Given how cyberattacks continue to grow and become more sophisticated, being prepared by understanding the risks of cyberattacks and taking the proper measures to protect against these attacks is critical for us and all of Canada’s ports,” says Port of Vancouver spokeswoman

00_Gateway 2018_48p_00.indd 27

Danielle Jang.

Jang says the port is educating employees about cyberattack methods and trying to learn from external cybersecurity experts more about how to prevent attacks.

“We collaborate with organizations such as the Canadian Cyber Incident Response Centre, which provides timely and relevant cybersecurity information so that the port authority and other stakeholders can stay actively aware and responsive to cybersecurity threats,” she says.

“As part of our responsibility to protect national security, the details of these programs and any other security services implemented by the port authority must remain confidential.”

Port of Prince Rupert spokesman Kris Schumacher calls cybersecurity “a tricky subject,” but avoided providing details on the port’s cybersecurity measures other than saying the port works with Public Safety Canada on its national approach to manage and co-ordinate against potential cyberattacks.

“This guides the protection of our own computer systems and procedures for information protection and security,” Schumacher says.

Too often, shipping companies are dealing with attacks after the fact, Macfarlane says.

“It’s not because [the shipping companies] don’t care,”

The potential for cyberattacks targeting container cargo and other shipping sectors is a rapidly rising concern for major deep-sea marine carrier companies | CHUYUSS & GLEBSSTOCK/SHUTTERSTOCK

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Cybercrime wave

Many of the cybersecurity risks faced by shipping companies are a result of ignorance about safe procedures for maintaining and monitoring computer systems, says a sector expert | MAXIM GAIGUL/SHUTTERSTOCK

he says. “I think it’s because they haven’t correctly assessed the risk it presents to their business.

“If they fully understood the threat that business faces, then they would be trying to do more. There’s not this critical mass yet of understanding in shipping in particular of what this threat is.”

The best defence is to prepare for an attack before it happens, he says.

“No prudent, reputable ship owner would allow his crew to go to sea now without them being well drilled in relation to how to respond to an engine room fire,” he says. “But very few, in my experience, will drill their crew or shore-based staff on how to respond should a cyber ransomware attack shut down their electronic navigation systems or shoreside operations.”

Both Davis and Macfarlane say simple measures such as teaching staff about best practices with email security, USB drives and interconnectivity can help boost security.

Creating a plan with security consultants would also be wise. Stamping out embarrassment and secrecy in the industry would also help, Macfarlane says.

“You don’t see a lot of reports in the industry media about security breaches and companies being compromised, but when you do talk to people one on one, pretty much everyone admits that they’ve paid out against a fake invoice, or had a breach, or been very lucky not to pay out against a fake invoice,” he says. “I think it would enable the industry to better respond to this growing threat if there was a little more sharing of experiences and intelligence.” É

CYBERATTACKS GROWING IN NUMBER AND SOPHISTICATION Following the expensive NotPetya cyberattack against A.P. MollerMaersk in June 2017, the company’s CEO, Soren Skou, called the event a “shocking experience.”

“Most business problems, you will have an intuitive idea on what to do,” he told the Financial Times. “But with this and my skills, I had no intuitive idea on how to move forward.”

The attack took down the shipping giant’s computer systems, halting its container ships at sea and stopping operations at its 76 port terminals around the world, costing the company about US$300 million.

“Your email goes down, all your address system,” he was quoted as saying in the report. “We ended up having to use WhatsApp on our private phones.”

00_Gateway 2018_48p_00.indd 28

Those comments by Skou were a significant revelation, says Rory Macfarlane, a maritime trade lawyer who deals with cybersecurity issues.

“It’s quite illuminating if someone as experienced as the CEO of Maersk, when faced with a significant cyberbreach, has no real intuition about how to move forward,” Macfarlane says.

“I don’t think many ship owners are going to have that intuition on how to move forward.”

Maersk declined to comment.

Macfarlane says there remains a major gap in cybersecurity thinking among shipping stakeholders.

“The amount and sophistication of attacks is increasing,” he says. “The digital and human attack surface is expanding, so the chance of keeping

cyberthreats permanently out of our businesses is diminishing month to month.

“It may be time for the debate to shift from cybersecurity to cyberpreparedness.”

He says a major part of the solution is for each major shipping firm to ask itself two central questions as the starting point to assess its cybersecurity: What do you have that is valuable? And who is going to be most interested in taking advantage of your business and its vulnerabilities?

The answers to those questions are a major part of implementing a cybersecurity plan, so that you are prepared for a cyberattack rather than just reacting to one, he says.

– Evan Duggan

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TECHNOLOGY AND LOGISTICS

CLEANING UP NICELY Company with ship-scrubbing technology developed in Vancouver targets rebounding Asian shipping hubs

CHUCK CHIANG

T

he Vancouver arm of marine vessel repair company Subsea Global Solutions, which up until March 2017 had been its own independent company, is now taking advantage of its new resources to carry out its original plans to expand further into Asia’s bustling shipping industry.

The group, formerly known as All-Sea Underwater Solutions, has for the last few years been developing technology to clean the hulls of large ships without having to take the vessels out of the water. With Florida-based Subsea’s acquisition of All-Sea in March 2017, company representatives say they will use the new momentum to better serve its global customer base.

In recent months, the effort appears to be paying off in South Korea, the world’s largest ship-building hub. In October, Subsea said its office in Busan – previously an All-Sea operation – had completed a four-year process of cleaning a 488-metre liquefied natural gas (LNG) vessel, one of the largest ships in the world.

The completion of the project, and the approval in the Port of Vancouver of its B.C.-developed hull-cleaning technology on a test-run basis, has made Subsea optimistic about getting approval to clean more ships in one of the world’s busiest ports in Busan.

“There are a lot of regulations on in-water hullcleaning solutions, because you are talking about potentially invasive species getting into the local waters,” says Brian Devlin, Subsea’s Asia/Oceania territory manager, who was based in Vancouver before moving to Korea six years ago. “But the large ships in the industry are always moving, and there are limited port

00_Gateway 2018_48p_00.indd 29

Subsea Global Solutions claims its hull-cleaning technology has major ecological and efficiency benefits for deep-sea cargo carriers | SUBMITTED

and layover options for them, so we believe in-water solutions have significant potential in South Korea, where a lot of these ships are built.”

South Korea is home to six of the world’s top 10 shipbuilders, including giant conglomerates like Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering Co. Ltd. and Samsung Heavy Industries.

After a well-documented drop in business in the last

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Cleaning up nicely

A Subsea Global Solutions diver works on a vessel. The company is aiming for Asian expansion | SUBMITTED

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few years (due to global shipment demand being dragged down by shrinking global trade networks and overcapacity in container shipping fleets), the sector marked a rebound in May 2017 when Hyundai, Daewoo and Samsung combined to take almost half of the total global orders for new vessels.

For the first five months of that year, Clarkson Research reported that South Korea again led global shipbuilding orders (which totalled two million compensated gross tonnes, or CGTs, higher than Chinaâ&#x20AC;&#x2122;s 1.84 million CGTs and Italyâ&#x20AC;&#x2122;s 740,000 CGTs), and Devlin says the hope for Subsea is to use recognition and business at Koreaâ&#x20AC;&#x2122;s largest port to help it expand to other main shipping markets in East Asia. â&#x20AC;&#x153;We are also applying for approval at Long Beach, California,â&#x20AC;? Devlin says. â&#x20AC;&#x153;That and Vancouver may be the key for unlocking the Korean market. If we can get full permission from Vancouver and from Long Beach, it will be much easier in Korea, because we can show them the jurisdictions that have approved our process, and then, nine times out of 10, theyâ&#x20AC;&#x2122;ll say â&#x20AC;&#x2DC;yes.â&#x20AC;&#x2122;â&#x20AC;?

Industry observers associate the shipping industryâ&#x20AC;&#x2122;s rebound with a specific class of vessels: oil tankers and LNG carriers. Given the

environmentally sensitive nature of those shipments, Devlin says, Subsea is using its cleaning technologyâ&#x20AC;&#x2122;s ecological and efficiency benefits as a major selling point with its customers. â&#x20AC;&#x153;Hull cleaning increases the performance of the vessel, but it also cuts down on exhaust emissions,â&#x20AC;? he says. â&#x20AC;&#x153;So the financial benefits are huge for the ship owners.â&#x20AC;Ś Itâ&#x20AC;&#x2122;s crucial, especially in Korea. There are so many big vessels here, and they donâ&#x20AC;&#x2122;t want to dry-dock them at all, if possible.â&#x20AC;?

Devlin notes that, if approved, Subseaâ&#x20AC;&#x2122;s cleaning technology can bring a 300% boost to the companyâ&#x20AC;&#x2122;s Asia business, which would then necessitate doubling its staff in Busan to 16. â&#x20AC;&#x153;The biggest benefits would be here in Korea, but those benefits will backflow, in one way or another, the other way to Vancouver and all our other offices,â&#x20AC;? he says. â&#x20AC;&#x153;We are going to be able to develop the technology better here versus Vancouver, because as opposed to having one big vessel a week, youâ&#x20AC;&#x2122;ll have one every day here.

It allows us to move faster.â&#x20AC;?

The plan, Devlin says, is to pursue approvals in Hong Kong, China and Singapore once Subsea gets the go-ahead in South Korea, which would integrate the company deeper into the regional shipping trade network. Ă&#x2030;

BRIAN DEVLIN AREA MANAGER, ASIA/OCEANIA TERRITORY, SUBSEA GLOBAL SOLUTIONS

There are a lot of regulations on in-water hull-cleaning solutions, because you are talking about potentially invasive species getting into the local waters

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TECHNOLOGY AND LOGISTICS

TRUCKERS AWAKENING TO

NEW TECH REALITIES

Metro Vancouver companies harnessing digital tools to find efficiencies in transportation

TYLER ORTON

DARYL EE CEO, SPEEDEE TRANSPORT

That truck that we’re sending from Vancouver to Toronto now, instead of going 95% full, it’s going 100% full. And that’s reducing the amount of trucks we need to send there

00_Gateway 2018_48p_00.indd 32

D

aryl Ee is ever the diplomat when describing the trucking business. While some might say it’s been slow to adapt to technological change, the president and CEO of Burnaby-based Speedee Transport simply calls it an “old-school industry.”

“You have to have good service; we need good technology to back that up,” says Ee, who got his start as a delivery driver for the family business when he was 17 and has been working in the industry half his life.

Over the years, he’s seen some of those “old-school” businesses either get bought out or shut out of the transportation industry when they couldn’t keep pace with change. Ee says he doesn’t want that happening to Speedee Transport.

A 2016 PwC report predicts the advent of the “digital truck” will transform how freight will be transported as businesses gain access to more data to help increase transportation efficiencies.

“As these digitally enabled, cloud-based solutions come online, they will rearrange how the logistics business operates, rendering obsolete old business models and enabling new ones,” the report says.

“Trucks will become even more tightly integrated into the entire logistics chain, with the arrival of shipments to factories, warehouses and end customers timed precisely, as all the players across the supply chain gain

full transparency into the whereabouts of their goods.”

To avoid the spectre of obsolescence, Ee’s company has been investing in software engineers to identify efficiencies in the trucking sector.

Speedee Transport employs 300 people across Canada, including three full-time engineers, and manages 400,000 square feet of warehouse space. The warehouse space is used by exporters and importers who need containers to be transported from the Port of Vancouver and stored before being trucked out to customers.

But Ee says industry-leading software has become onerous when managing a fleet of tractor-trailers stretching from the West Coast to Saskatchewan as well as managing the extensive warehouse space.

Many elements in the software couldn’t be customized, and if something could be customized, he says, the cost was prohibitively high.

“We had many meetings about it and struggled over this,” Ee says.

Four years ago the managers decided the company would need to contract a team of engineers to build

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proprietary software for Speedee that would allow the trucking firm to fully integrate with its customers’ software, customize as needed, track shipments in real time through the drivers’ GPS-enabled phones and automatically match certain loads with other shipments.

“That truck that we’re sending from Vancouver to Toronto now, instead of going 95% full, it’s going 100% full. And that’s reducing the amount of trucks we need to send there,” Ee says, adding the software has helped the company expand its business between 30% and 40% over the past four years while its fixed costs have remained the same.

As of December 2016, there were 66,751 businesses in Canada whose primary activity was trucking transportation, according to a Transport Canada report released in 2017.

Approximately 9,750 trucking companies operate in B.C. They include small for-hire carriers and owner-operators, and some medium-sized and large for-hire companies that operate fleets of trucks and offer logistic services.

Meanwhile, the value of trucking traffic between Canada and the U.S. grew 16.3% between 2015 and 2016 to $418 billion.

“I don’t think many businesses have taken the time to assess what the sustainability challenges are going to be for the next decade,” says Go99 CEO Devlin Fenton, whose North Vancouver-based firm has developed an app to connect shippers and carriers directly.

The app was commissioned by the Surespan Group of Companies, which in 2015 had been undertaking a 10-year review of sustainability that revealed a lack of transparency and control of supply chains was the company’s biggest liability.

“You generally load [freight] up and it disappears into the void, and there’s kind of a promise it’s going to arrive there on time and in one piece for the price you agreed on,” Fenton says. “We looked at that and thought, ‘That has to change.’”

Carriers use Go99 to submit quotes to shippers that are able to review other quotes. Meanwhile, the app handles invoicing and payments, effectively eliminating the need for middleman brokers in the trucking industry.

“The Pacific Northwest is traditionally slow to adopt new processes and new technologies, which is why the few who do really well here are those early adopters,” Fenton says, adding that carriers and shippers dealing

primarily with the Port of Vancouver have been more resistant to using the app than Lower Mainland companies involved with fabrication and manufacturing.

From the app’s launch in April through to November, Go99 attracted 1,500 users and generated $1 million in revenue, according to Fenton.

“The bigger companies see the potential in [investing in technology], but to actually implement it is challenging just because so many new technologies and trends are coming together at more or less the same time over the last few years,” says Harish Krishnan, a professor specializing in supply chain management at the University of British Columbia’s Sauder School of Business.

Traditionally, larger companies have had more access to computational resources that would allow them to use technology to find efficiencies in supply chains, according to Krishnan.

“That’s also another thing that’s changing with cloudbased computing,” he says.

“Computing resources are no longer a constraint for an innovative company to implement some of these new technologies and ideas. I don’t think going forward it’s going to be only the big companies who can take advantage of this.” É

Daryl Ee’s Speedee Transport employs 300 people across Canada, including three fulltime engineers, and manages 400,000 square feet of warehouse space | ROB KRUYT

MAKING A DIFFERENCE. At Kiewit, the important things we build are the relationships with our community, and with the organizations that help make it strong and vibrant.

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TECHNOLOGY AND LOGISTICS

VANCOUVER HARBOURS

GLOBAL SHIPPING HUB ASPIRATIONS Increase in marine management companies could be a sign of city’s rise in the ranks of global shipping industry centres

PATRICK BLENNERHASSETT

A Kaity Arsoniadis-Stein, executive director of the Vancouver International Maritime Centre, which was created to raise the city’s profile in the international shipping industry | SUBMITTED

00_Gateway 2018_48p_00.indd 34

s Vancouver raises its international economic profile, it is attracting more major players in the global shipping industry.

Recently, 140-year-old Danish shipping company Norden became the latest in a string of international shipping corporations to open offices or headquarters in Vancouver.

Kaity Arsoniadis-Stein, executive director of the Vancouver International Maritime Centre (VIMC), notes that in the past three years, 11 international companies, including Vietsea, Distinct Channel and Prime Ship Corp., have set up offices in Vancouver, and almost 40 more are considering the move.

According to the VIMC, set up three years ago to raise Vancouver’s profile in the international shipping industry, the city could create a global shipping hub that would generate an estimated $20 billion annually toward Canada’s gross domestic product.

But the path to creating that hub is not without hurdles.

Robert Hedley, a senior executive with Greystoke Marine Management Ltd., says Vancouver will climb

onto the world stage only if it’s able to attract more of the professional services that typically support the marine industry. Vancouver has a few established marine law firms in the city but would require a far bigger network of companies, he says.

“We need to attract more major commercial banks and other financial services, and marine insurance companies in order to develop a significant critical mass of marine-related businesses. Other maritime hubs such as Singapore and Hong Kong have succeeded in building such an infrastructure. We need to do the same.”

Hedley was first recruited to come to Vancouver by Teekay Shipping, a former Long Beach-based company that moved its headquarters to Vancouver in 1991. He

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Robert Hedley, a senior executive with Greystoke Marine Management Ltd., says Vancouver has the potential to become a global shipping centre if it can continue to attract the right players | CHUNG CHOW

ROBERT HEDLEY SENIOR EXECUTIVE, GREYSTOKE MARINE MANAGEMENT

signed on as technical director in 2000. While working for Teekay, Hedley met fellow employees Mads Meldgaard and David Glendinning, and, in 2016, they launched Greystoke.

Greystoke offers consultation to private equity companies, banks, ship owners and entrepreneurs for new marine investment projects and asset management strategies for existing facilities and vessels.

Hedley says the decision to start a marine management company was not one they took lightly.

“It is a well-known fact that the shipping industry, just like many other business sectors, has suffered some hard times during the last eight or nine years. While Vancouver has many attractions, the idea of physical relocation to another country can be a dauntingly expensive proposition for a marine business owner to contemplate, particularly after working through many years of consolidation.”

The global trade industry could be poised for a rebound after years of sluggish growth and the loss of a few major players. The industry has yet to recover from the economic downturn of 2008-09, but analysts are predicting increased trade along major cargo routes for 2018.

Some of the world’s largest shipping hubs generate billions of dollars toward their countries’ respective GDPs annually. This includes Olso, Norway (US$28.7 billion), Rotterdam, Netherlands (US$26.3 billion) and Singapore (US$20 billion).

00_Gateway 2018_48p_00.indd 35

Hedley says one of the issues with promoting shipping as a viable part of a city’s or country’s economy is that the industry has drawn negative publicity over its environmental record.

“Unfortunately shipping has been taking some criticism lately because of concerns about ships contributing to emissions and other forms of pollution. The general public may not be aware that the designs for ships of all types have undergone tremendous changes in recent years.”

Arsoniadis-Stein says political developments such as the United Kingdom’s exit from the European Union and moves by the administration in the United States to abandon the Trans-Pacific Partnership and renegotiate the North American Free Trade Agreement have heightened uncertainty within the industry. She says the balance of power appears to be shifting to the Asia-Pacific region, which could benefit Vancouver given its direct shipping links to Hong Kong, Singapore and Tokyo.

“Asia-Pacific has taken a central role in international investment and trade agreements,” she says. “This may indicate a paradigm shift for investment groups, which are seen to move to more balanced, stable and business-friendly regimes that welcome international corporations. Nevertheless, higher geopolitical risks and political uncertainty could affect the scale and forms of future international investment.” É

It is a wellknown fact that the shipping industry, just like many other business sectors, has suffered some hard times during the last eight or nine years.

While Vancouver has many attractions, the idea of physical relocation to another country can be a dauntingly expensive proposition for a marine business owner to contemplate, particularly after working through many years of consolidation

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

ENVIRONMENT/CHALLENGES

STILLING THE WATERS

Port of Vancouver program aims to help endangered killer whale population by reducing propeller noise

PATRICK BLENNERHASSETT

A ORLA ROBINSON PROJECT MANAGER, ENHANCING CETACEAN HABITAT AND OBSERVATION

Killer whales in particular use sound to find prey and to socialize and communicate.

And the underwater noise coming from those vessels interferes with their ability to do those things

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s one of the Pacific Northwest’s most iconic creatures, killer whales are ubiquitous in B.C. They’re on the Vancouver Canucks’ logo, are all over tourism advertising and grace many pieces of local First Nations art. Yet the real-life southern resident killer whale is far scarcer than its representation in art and marketing. The species is classified as endangered by two organizations, and large areas of ocean off the coast of the Pacific Northwest in B.C. and Washington state are designated critical habitat zones.

Orca populations have been in serious jeopardy since the 1980s due to higher levels of toxic chemicals in the water and a general rise in ship activity in the area, according to Fisheries and Oceans Canada. As of October, the southern resident killer whale population totalled just 76.

In 2014, the Vancouver Fraser Port Authority launched the Enhancing Cetacean Habitat and Observation (ECHO) program to try to mitigate the impact that large commercial vessels and cruise ships are having on the species. Leading the initiative is project manager Orla Robinson, who says there is one issue the ECHO program is keying on to help the local killer whale population.

Research and studies have found that propeller blades from large vessels can create noise that hampers the killer whales’ ability to locate prey.

Propeller blades on large vessels produce a foamy wake made up primarily of air bubbles that explode underwater, creating a noise that interferes with killer whales’

ability to hear underwater.

“Killer whales in particular use sound to find prey and to socialize and communicate,” says Robinson. “And the underwater noise coming from those vessels interferes with their ability to do those things.… The killer whales send out a click noise that bounces off fish, and if they can’t hear that click come back, then they miss the opportunity to feed.”

Robinson uses the analogy of speaking to someone at a crowded pub, in that as the level of surrounding noise rises, it becomes harder to have productive conversations.

Southern resident killer whales feed primarily on chinook salmon that are in the area seasonally.

These spawn primarily in the Fraser River but have a migration route that spans the entire northern Pacific Ocean. Robinson says the salmon’s population is much lower than usual, which has worsened the problem for the orcas, which migrate to the area to feed at a specific

2018-04-03 11:36 AM

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time of the year.

In 2017, the ECHO program launched a voluntary vessel slowdown trial in Haro Strait to see if reducing speed would help cut the amount of noise coming from the vessels.

Robinson says that over two months last summer, 950 vessels sailed through the strait and 60% participated in the voluntary trial. Findings from the trial are being studied.

“We had over 50 shipping companies commit to the trial before it began. So it was a huge engagement with the shipping world.”

Robinson adds that the port has a number of incentives that reduce harbour dues in return for steps to reduce noise from vessels. She acknowledges that increased traffic through the Port of Vancouver has an effect on the killer whales, but she notes many broad factors have been hampering the southern resident killer whale population for years, though attempts to pinpoint an exact cause have been inconclusive.

“I certainly couldn’t say that the threat of acoustic disturbance is the primary cause of their population size.”

The Port of Prince Rupert launched its Green Wave

00_Gateway 2018_48p_00.indd 37

program in 2013. It offers discounted harbour dues to commercial vessels that reduce emissions or implement other environmental practices, including reducing noise from propeller blades.

Ken Veldman, director of public affairs for the Port of Prince Rupert, says the program initially targeted air emissions from vessels but has since expanded. He says he’s encouraged by the response from private shipping companies.

“I think it’s important to give credit to the shipping industry here. When you talk about these design changes to hulls and props, that really is coming from the industry side of things, and we can help by providing that incentive program.”

In November 2016, the federal government announced a $1.5 billion investment in its oceans protection plan.

It includes recovery plans for three endangered whales with habitats in Canadian waters: the North Atlantic right whale, St. Lawrence estuary beluga and southern resident killer whale. The federal government has also recently implemented an update to the Marine Mammal Regulations, which are specifically designed to help the southern resident killer whales. É

The Vancouver Fraser Port Authority’s Enhancing Cetacean Habitat and Observation program is aimed at helping the population of southern resident killer whales off B.C.’s coast | JOAN LOPEZ

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ENVIRONMENT/CHALLENGES

MAKING THE

CONNECTION Vancouver and Prince Rupert ports win first-in-Canada distinctions for shore-power environmental initiative

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PATRICK BLENNERHASSETT

V

ancouver is in the forefront of initiatives to reduce pollution at ports by allowing large vessels to shut off their engines when berthed by plugging into a land-based electrical grid.

West Coast port shore-power initiatives were the first of their kind in Canada on two separate occasions.

In 2009, the Canada Place cruise ship terminal became the first in the country and the third worldwide to offer shore power for berthing cruise ships. Between 2009 and 2016, 428 cruise ships connected to shore power at the Port of Vancouver, removing an estimated equivalent of 15,849 tonnes of carbon dioxide emissions from the atmosphere.

Tom Corsie, vice-president of real estate for the Vancouver Fraser Port Authority, says the idea is to improve air quality and protect human health.

“Shore power allows cruise ships to plug into the landbased electrical power grid and shut off their diesel generators, thereby reducing noise and emissions,” he says, noting the number of cruise ships that have connected has increased in the past five years.

Corsie adds, however, that “although it seems straightforward, shore power is not a plug-and-play or one-sizefits-all system.”

There are three shore-power connection points at Canada Place, and there are numerous conditions that determine whether a ship can or can’t plug in, Corsie says. These include the location and limitations of the ship’s shore-power connection, configuration of the land-based shore-power equipment and availability of electricity from BC Hydro.

Corsie says BC Hydro offers a fixed power rate for vessels connected to shore power, but the utility retains the right to halt the service if electricity is needed somewhere else on a grid – for example, during periods of high demand on cold winter days.

In 2011, the Port of Prince Rupert became the first port in Canada to offer shore power for container ships, when it implemented the service at its Fairview container terminal. The Port of Prince Rupert estimates the project

reduces annual greenhouse gas emissions by about 4,000 tonnes and air contaminants by about 160 tonnes.

Ken Veldman, director of public affairs for the Port of Prince Rupert, says the port is still working on finalizing rates with BC Hydro.

“There’s some complexities to that,” Veldman says.

“My understanding of it is that essentially when you have a power rate, it’s not just a function of volume but also of demand. So if you’ve got an ongoing industrial facility where your demand is somewhat consistent, you can build that into a rate. Now in the case of shore power at a terminal, it’s a relatively significant draw, but it’s very inconsistent. A vessel comes in, then suddenly it’s gone, and it could be quite some time before you have the next one.”

In 2015, the Vancouver Fraser Port Authority announced jointly with the federal government a plan to install shorepower facilities for container vessels at both Deltaport and Centerm terminals. The project, which is slated to be completed in spring 2018, is expected to cost $12 million, of which $6 million will come from Transport Canada’s Shore Power Technology for Ports program and $6 million from the Vancouver Fraser Port Authority.

The Vancouver Fraser Port Authority has a number of emissions-reduction initiatives, including the Northwest Ports Clean Air Strategy, the EcoAction program and the Non-Road Diesel Emissions program.

The port authority’s third Port Emissions Inventory Report, which was released in 2017, shows air pollutant emissions have decreased significantly since 2010, despite an increase in trade through the port. The port attributes the decrease to stronger regulations and increased investment in new technology.É

The Port of Prince Rupert was the first port in Canada to implement shore power for container ships | SUBMITTED

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

ENVIRONMENT/CHALLENGES

SAFE PASSAGE

Marine pilots help keep cargo traffic flowing safely in B.C. port waters

PATRICK BLENNERHASSETT

MIKE ARMSTRONG MARINE PILOT, FRASER RIVER PILOTS

Communication is huge

T

he variables that Mike Armstrong encounters during his job for the Fraser River Pilots seem innumerable. Armstrong, who boards large vessels as a marine pilot to guide them into, through and out of the Fraser River to and from one of three deep-sea terminals, has to take a multitude of factors and procedures into account. As part of Transport Canada’s Pilotage Act procedure, Armstrong takes over from the ship’s international captain and the BC Coast Pilots pilot who has guided an incoming ship from the Strait of Juan de Fuca.

Some of the vessels Armstrong pilots can be 300 metres long and 40 metres wide and weigh up to 100,000 tonnes.

He also pilots a wide range of vessels: everything from container ships and bulk carriers to car carriers from Japan and Korea.

His job requires that he navigate a vessel, which at times might have only a few feet of water underneath it, while communicating with local tugboat operators who help dock the ship at its final destination while interacting with captains and crews from foreign countries whose English-language skills vary widely.

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“The pilot is, legally in Canada, in control of the ship and in control of navigation,” says Armstrong. “The captain remains the captain in terms of managing his crew, but in terms of conning the ship, the navigation of the ship, the pilot is in charge of that.”

When it comes to the skill set he needs to do his job safely and accurately, Armstrong says that, outside of a high degree of local knowledge of the waterway itself, one thing is key.

“Communication is huge obviously,” he says.

Armstrong adds that the International Maritime

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Mike Armstrong of the Fraser River Pilots says marine pilotage is a complicated but exciting job | ROB KRUYT

Organization, which is a branch of the United Nations, requires that all communication on a ship’s bridge in pilotage waters must be in English.

“They’re all supposed to speak English, but some are better than others. So communication from my end is important.”

Armstrong has been working as a marine pilot for 17 years. He started sailing in tugboats soon after he left high school about 42 years ago. Since then he has piloted approximately 2,300 vessels, on average about three or four a day when he’s working.

When he’s on duty, Armstrong is on call 24 hours a day, seven days a week.

Because the ship is under his command when he’s the river pilot, his word is law. That responsibility requires a special persona.

“You have to be a bit of a Type A personality,” Armstrong says. “And believe that you’re right about everything because you’re in charge of a hell of a lot. And the liability is massive, the dollars that are at stake if you crack up a ship or something, from an environmental perspective, from an economic perspective. If you cream into a dock and take the container cranes out or if you park a ship in the middle of a river and block the river, the economic impact is just out of sight.”

The role shares similarities to airline pilots; however, the waterways Armstrong navigates are much more constrained and required an expert grasp of the area’s geography.

“From a local knowledge perspective you can’t just be a general practitioner and say, ‘Well, I’ll just go full speed

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and drive through that like you can in an airplane.’ You better be an expert on that waterway or it will not work out. So the ports are not standard; what we do in the Fraser River is entirely different from what goes on in Burrard Inlet regarding the nature of the waterway and the tides and all that.”

Armstrong says planning and detailed river knowledge are critical.

“You always have to be thinking way ahead because you don’t get a second chance with big ships when you’re going around corners. You have to know what that current is going to be. So that’s why you have these pilots come on because we’re experts in two things; we’re experts in manoeuvring big ships of all types and, of course, we’re experts on [a] particular waterway.”

The Port of Vancouver’s Port Information Guide contains a set of localized practices and procedures designed to “promote safe and efficient navigation within the waters of the port and support efforts to protect the marine environment.” It covers all vessels in the port, including pleasure crafts and recreational vessels.

Chris Wellstood, the Port of Vancouver’s harbour master and director of marine operations and security, says one of the main challenges facing Vancouver and other major ports around the world is that the ships are getting bigger while the infrastructure and local geography have stayed the same.

“The challenges in the last couple of years have come from the increased size of the vessels. In the last 20 years we’ve moved about an additional 40 million tonnes of metric cargo [compared with what] we did back in 1996.” É

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

ENVIRONMENT/CHALLENGES

PORT PROMOTING FROM WITHIN Internal hires and word of mouth helping port during worker shortage

PATRICK BLENNERHASSETT

B

ritish Columbia’s labour shortage is hitting every industry from restaurants and real estate to technology and the shipping industry. WorkBC’s latest labour market outlook estimates that over the coming decade 70% of all job openings will result from people leaving the workforce, mostly due to retirement, and that 78% of future jobs will require some form of post-secondary education or training.

Some of the toughest positions to fill will be at the executive or leadership levels due to the retirements of baby boomers.

Many companies and agencies are struggling to fill upper-level positions across a wide array of industries including shipping. Prince Rupert Port Authority president and CEO Don Krusel, for instance, retired last September after 25 years in the top job. As of late March, the job posting to replace Krusel was still on the port’s website.

The departures have forced a lot of companies or government agencies to get creative in hiring and retention.

Sandi Case, vice-president for people and business performance at the Vancouver Fraser Port Authority, says 70% of the organization’s executive and director-level positions are filled through promotion of internal candidates. The latest Conference Board of Canada report

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on human resources trends found that well under a third of Canadian companies are promoting employees from within for positions that report directly to chief executive officers, and that half of Canadian businesses see leadership development as their top worry among human resources issues.

The Port of Vancouver is Canada’s largest port. It generates an estimated $2.7 billion in wages annually and contributes $3.9 billion to the province’s gross domestic product. Port of Vancouver activity sustains about 96,200 jobs in B.C., and it is the third-largest port in North America by tonnage.

“We can’t speak for the shipping industry, but as a port authority, we have some very unique and specialized jobs in areas including marine operations, supply chain operations, infrastructure development, sustainability,

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SANDI CASE VICE-PRESIDENT, PEOPLE AND BUSINESS PERFORMANCE, VANCOUVER FRASER PORT AUTHORITY

planning and environmental programs to name a few,” Case says. “Hiring for these positions can present a great opportunity for the right person, but it can also be challenging to fill these very specialized roles.”

Case says employee word of mouth is the most efficient way the port fills positions, trumping digital conduits like LinkedIn and social media.

“Like many organizations, but in particular in the transportation sector, we also face challenges in attracting and retaining female employees at the executive level,” she adds. “However, we are proud to say that we have a roughly 50-50 balance between men and women at the management level and are continuing to work on gender balance right through the organization.”

Cissy Pau, principal consultant for Clear HR Consulting, says companies looking to fill executive positions also need to start conversations with current executives.

“We’ve had some clients look more closely at having their CEOs or senior managers involved in developing succession plans for their successor,” Pau says. “Some companies have been willing to consider candidates with limited experience but tremendous potential.”

Kaity Arsoniadis-Stein, executive director of the Vancouver International Maritime Centre (VIMC), says Vancouver needs to capitalize on its job creation

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potential in the shipping industry, or it could lose out on sustaining a sector that can continue to produce high-quality and high-paying positions.

However, Arsoniadis-Stein notes Vancouver is not known for being a “port city,” though it is starting to garner more international attention within the global shipping industry. Menon Economics’ recent report, The Leading Maritime Capitals of the World 2017, concludes that apart from No. 1-ranked Singapore, “no city has a more attractive policy framework than Vancouver” for aspiring international maritime centres.

The VIMC, which is partially funded by the provincial and federal governments, is entering its third year of a mandate to raise Vancouver’s profile in the global shipping industry.

Arsoniadis-Stein says more needs to be done to attract attention and, ultimately, workers to local shippingrelated jobs.

“Canada is not participating in the highest value-added knowledge-based services of its trade, or indeed global trade,” she says. “Canada has an opportunity to capture a vibrant international industry, bringing to Canada high knowledge, high value-added jobs and diversifying its economy, while generating an economy beyond its borders.” É

We have some very unique and specialized jobs in areas including marine operations, supply chain operations, infrastructure development, sustainability, planning and environmental programs to name a few.

Hiring for these positions can present a great opportunity for the right person, but it can also be challenging to fill these very specialized roles

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

ENVIRONMENT/CHALLENGES

CLEARING THE AIR In 2020, the world’s 70,000 ocean-going vessels will be required to lower sulphur emissions, a restriction that will have wideranging repercussions for ports and shipping companies NELSON BENNETT

P

ollution from international shipping is so bad that it appears to be increasing the frequency and intensity of lightning storms along shipping lanes, according to a recent scientific study. The study, published last September in Geophysical Research Letters, analyzed 12 years of weather data to conclude that lightning storms are intensified along the most heavily travelled shipping routes in the Indian Ocean and South China Sea. It theorizes pollutants from ocean-going vessels are likely the cause.

Starting in 2020, the International Maritime Organization (IMO) will require the international shipping industry to start cleaning up its act.

It will require international ocean-going vessels to reduce sulphur oxide emissions to 0.5%, which means operators will need to install scrubbers (at $5 million to $10 million each), switch to lower-sulphur marine diesel (at twice the price of heavy fuel oil) or switch to zero-sulphur (and lower-carbon) liquefied natural gas or methanol.

It promises to be a sea change for the shipping industry – a very costly one that could result in increased prices for almost everything that moves by sea.

A report by DNV GL estimates shipping costs could increase 20% to 85%. It also warns of “severe disruptions

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and market distortions” for the refining industry as the sector tries to cope with falling demand for heavy fuel oil and increasing demand for diesel.

But there could be economic benefits – not to mention some obvious environmental ones – for ports like Vancouver’s and companies like Methanex Corp. and FortisBC, since the pending regulations, as well as the desire to shrink the industry’s carbon footprint, are already resulting in the use of methanol or liquefied natural gas (LNG) engines in new ocean-going vessels.

Whether a company decides to install scrubbers and continue to use low-cost heavy fuel oil, switch to lower-sulphur diesel or choose LNG or methanol will depend on the vessel, its age, the routes it travels and the

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availability of fuels at the ports where it refuels.

Bunker fuel (heavy fuel oil) is widely available around the world, so some companies may opt to install scrubbers on older vessels, simply because the fuel is more readily available.

“Cruise ships go a different route, and they seem to be putting their money into scrubbers,” says Tony Brewster, president of Marine Petrobulk, a business unit of Seaspan Corp.

Otherwise, he sees many shippers switching to diesel.

“My guess, at this point, would be that the majority of the market will move to marine diesel,” he says. “The cost of that will essentially double the fuel costs for a vessel’s operation.”

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Brewster says about 75% of the fuel that Marine Petrobulk supplies to ships calling into port in Vancouver use heavy fuel oil and only 25% burn marine diesel. He expects that ratio to flip after 2020, with 85% to 90% of the ships running on diesel and only 10% to 15% using fuel oil and scrubbers.

“At this point in time, my customers are indicating that it’s going to be a diesel market, and diesel’s in plentiful supply right now and I don’t see that changing going forward,” Brewster says.

The twinning of the Trans Mountain pipeline could mean additional capacity for diesel. Rob Hoffman, director of government and stakeholder relations for the Canadian Fuels Association, says Alberta refineries will have no

Starting in 2020, the International Maritime Organization will require international ocean-going vessels to reduce sulphur oxide emissions | PHILLIP MINNIS/SHUTTERSTOCK

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GATEWAY 2018 PUBLISHED BY BUSINESS IN VANCOUVER

Clearing the air

TONY BREWSTER PRESIDENT, MARINE PETROBULK

My guess, at this point, would be that the majority of the market will move to marine diesel.

The cost of that will essentially double the fuel costs for a vessel’s operation

problem meeting any additional demand for marine diesel.

Should Vancouver also become an LNG bunkering hub, it could give the Port of Vancouver a distinct advantage.

“Ava i labi l ity w i l l be a big issue,” says Rober t Lewis-Manning, president of the Chamber of Shipping BC. “And having the availability here in Canada can be a competitive advantage.

“Having both fluidity to move cargo through, but also the logistics to support it and have the availability of low-sulphur diesel, normal bunker fuel and alternative fuels like LNG, will only increase the competitive advantage of Canadian ports.”

In the short term, it’s expected many operators will either install scrubbers or switch to marine diesel for existing ships. It’s in new builds where there is more likely to be a transition to LNG or methanol. But it also depends on where the shipper operates.

“For a vessel that’s on a fairly predictable schedule or trading pattern – for example, it calls on the same ports regularly – there would be more impetus to maybe take the leap and look at an alternative fuel like LNG,” Lewis-Manning says. “Whereas if you are trading in commodities that are more on the spot market and you’re not sure where you’re going to be trading, it’s difficult to commit to that technology change.”

One cruise line operator that is making the switch to

IMS Marine Surveyors & Analytical Laboratories Ltd. Port Metro Vancouver, BC, Canada Marine & Cargo Surveyors & Inspectors Dry; Liquid Bulk; Containers; Ultrasonic Tightness Testing; Investigators & Expert Witness; P&I Clubs; H&M; Pre-Purchase; Superintendency; On/Off Hire Condition & Bunker

LNG for some of its new vessels is Carnival Corp., which will launch two new cruise ships that will be powered entirely by LNG in 2020 and 2022.

Teekay Offshore Partners LP, a subsidiary of Vancouver-headquartered Teekay Corp., which operates a fleet of oil tankers and LNG and liquid petroleum gas tankers, is also moving to LNG power. Last year alone, Teekay Offshore announced contracts to have four new shuttle tankers built that will be fuelled by LNG. Media reports in March noted that Teekay will likely use distillates rather than other marine fuel options to comply with IMO requirements.

Meanwhile, Vancouver’s Methanex Corp., the world’s largest methanol producer, has been moving aggressively into the methanol fuel business for the shipping sector.

Methanex operates a fleet of 28 chemical tankers through its subsidiary, Waterfront Shipping Co. Seven of those vessels can run on methanol. FortisBC and WesPac Midstream LLC are exploring the building of a jetty at FortisBC’s expanding LNG plant on Tilbury Island, with the aim of developing LNG bunkering capacity.

A study commissioned by the Port of Vancouver in 2016 projects that LNG-capable ships are likely to begin making port calls in Vancouver between 2021 and 2025, with a regular demand for LNG bunkering coming between 2025 and 2030. É

2018 | THE B.C. PORT MAGAZINE

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